accounting Archives - BEAU | Broadcast, Entertainment, and Arts Unions

The taxman cometh (6)

Posted on 5 May 2012

FEU Training Blog

Don’t be overtaxed

If you work from home and you ask HMRC how much you can charge for using your home as an office, you’ll get one answer: £2 a week. That’s a little over £100 a year. Without the advice of an accountant that is all you’d be able to offset against tax.

The reality is many of us can charge substantially more than that. HMRC has oversimplified it to try to stop people claiming what is rightfully theirs. “This is the best example of why you should use an accountant,” says tax expert Dave Morrison. “How much you can claim varies depending on the size of your house and how much of it you are using for work and whether you are using it exclusively for work. If you are using a quarter of your house for work then you can claim a quarter of the running costs.”

Dave is a former MOBO-nominated DJ and music promoter who has returned to accountancy. He specialises in entertainment clients and covers not just actors but all the trades involved with film, TV and theatre as well as musicians and other media types. He’s a partner at Nyman Lisbon Paul but is also on the entertainment and media group at accountancy body the Institute of Chartered Accountants in England and Wales (ICAEW). He knows his onions.

Dave is swift to point out that someone converting a room at home into a studio, for example, needs to be careful not to put the cost of the conversion against the business, otherwise the house will become liable for capital gains tax when sold.

Expenses

Depending on what job you do, there are loads of things you can claim as legitimate business expenses. Actors, for example, can claim theatre and cinema tickets; musicians can claim CDs or music downloads or the cost of concert tickets. But Dave warns you not to try it on – you cannot take your spouse to the theatre or concert and claim for two tickets.

The thing about tax and accountancy is that the rules are not fixed. Apart from changes announced in budgets each year and tweaks to legislation or to regulations, UK legislation is also shaped by individual court and tribunal rulings that can radically alter the way everyone has to do business.

There are major cases – one at present is looking at ITV services and how TV workers should be treated for National Insurance. There are also tax raids on suspected dodgy accountants, sometimes leading to convictions and sometimes to HMRC getting egg on its face. A high-profile raid in 2010, for example, targeted an accountant, Christopher Lunn – he had a lot of entertainment clients whose affairs were thrown into disarray. People such as Dave have to keep abreast of all these.

There are also specific rules for different sectors, with certain grades of contractors having to comply with fixed accounting rules.

Limited company

Then there are decisions about whether or not a freelance might benefit from trading through a limited company rather than as a sole trader. Some firms, such as the BBC, quite like paying freelances through limited companies, others less so.

Accountants have different opinions on the income level at which it becomes worthwhile for a freelance to pay the extra costs of running a limited company. Their advice is based on an individual’s circumstances; it’s not a tick-box exercise.

The key thing is to take your accounts and book-keeping seriously and to pay a qualified and regulated accountant for the best advice you can afford. It may seem taxing, but it’s better than being overtaxed.

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The taxman cometh (5)

Posted on 29 Apr 201210 May 2012

FEU Training Blog

Choosing your accounts software

To err is human, but to really foul things up requires a computer - you’ll remember that adage if you are of a certain age. But the reality is that these days we all need to do our accounts on a computer. That means choosing what software to use.

The first thing is to check with your accountant what they are used to working with and what they recommend. You want to be able to hand your accounts over electronically, either on a disc or by email.

Simple or complex?

You also need to bear in mind how complex your accounts are likely to be. Most lone freelances with basic income and expenditure accounts can probably manage with just inputting the numbers into a spreadsheet under the right headings. That probably simply means Microsoft Excel or something similar – that comes as part of the Microsoft Office suite.

You might prefer something that can handle more complex data – certainly worth it if you are planning to be busier and expand into new ventures or operate as a company. You might need to buy an accounts package, such as Quickbooks or even Sage.

Many accountants are happy to receive files in these formats. Sage is the sort of package big businesses use – and can manage payroll, for example – though small business versions are available. But Sage is far from intuitive – I find it almost impossible to understand – so only go down these routes if you are prepared to devote time to learning the intricacies of the software or ready to pay someone to do your book-keeping for you.

Online solutions

The other option is to look at online book-keeping packages. Many accountants will now accept accounts in some of the formats available. The advantage of these is that they are free, or cheap, and you can update your accounts from any computer rather than having to be at the computer with your software loaded.

The downside is that they are often limited and you hear reports of them failing and data being lost. Having paid nothing or next to nothing, there’s no recourse if you need to complain. Check your accountant’s experience of the online services and follow their advice.

The taxman cometh (2)

Posted on 12 Apr 2012

FEU Training Blog

Paperwork

Organise yourself. Ask for receipts and keep them. In fact, file them – don’t just stuff them in a carrier bag to deal with later.

Handing over a shoebox of receipts to an accountant at the end of the year is a guarantee of a more expensive accountant’s bill and you paying more tax than you should have done. Good record-keeping will save you money.

It’s the easiest thing in the world to leave admin until later but it’s the hardest thing in the world to catch up months later. Try to schedule an hour a week or an afternoon a month to catch up with all your accounts and admin.

Keep a diary and make sure you check your receipts against trips out. Most of us can expect to have receipts for trains or taxis or petrol, plus some subsistence – coffees or lunches – as a minimum on a day out, but there may be other items too. Did you buy an important newspaper or specialist magazine that day? Did you get some photocopying done or buy some stationery or something for your computer? By checking your expenses against your diary you will spot missing receipts in time to find and file them.

Check your monthly credit card bill and bank statement. Is there any spending there that you have not included or for which you can find the receipt? Have you got the bill that’s been covered by a direct debit payment – often bills are no longer posted and you need to go online and print them out. It’s much easier to do this each month than to try and print out 12 monthly bills at the end of the year. If you bought something online have you printed out the emailed invoice?

It is often easier to have one credit card for business spending – but always pay it off in full every month. You can then include your credit card bill with your accounts as evidence of spending, even if you have misplaced a receipt.

But don’t shy away from cash if cash is the cheaper option. I have seen people in coffee shops try to buy their cappuccino by card, only to be told there is a minimum charge that requires them to buy a pastry too. There’s no saving there. Paying by cash and keeping the receipt is a better option, providing you are efficient enough to keep that receipt and file it as soon as you get home or back to your office

The key is being organised. Put in place a system that suits you – and stick to it.